Core:
noun, the most important part of a thing, the essence; from the
Latin cor, meaning heart.

Volume 2.17

This Views Prose

December 30, 2002

Adam Smith on the Businessman, the Consumer, and the Cultural Costs of Capitalism

But there is another, less obvious Adam Smith who is also appears in the pages of Wealth of Nations. He, too, was a player in a contemporary debate raging in Edinburgh, about the new commercial spirit sweeping across Scotland and what it might mean for the future. This Adam Smith also flies in the face of the third myth about him and his greatest work, that it is basically an apologia for big business and the merchant class.

In fact, while Wealth of Nations speaks highly of free markets, it treats businessmen themselves in a very different light. To begin with, Smith saw the important beneficiaries of the free market not as businessmen but as consumers. Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. This was precisely what the existing British system failed to do. It put the interest of the producers and merchants ahead of that of consumers, who only want low prices and a ready supply of goods. Merchants often prefer the opposite. In fact, Smith understood that much of the British governments disastrous trade policies came at the instigation of the London merchants themselves, who wanted to protect their livelihood. It is the interest of every man to live as much at his ease as he can, Smith notes in Book Five, and that rule applies as much to the businessman as it does to the landed aristocrat or university professor.

His overall picture of the typical businessman is certainly unflattering, and reading it must have made some of his Tobacco Lord friends slightly uncomfortable. He notes that while they often complained about high prices, they say nothing concerning the bad effects of high profits. He speaks of their mean rapacity and monopolizing spirit and suggests that the government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatsoever. Most of this was aimed at the business community in London, which had instigated and benefited from the corrupt old imperial system, rather than Glasgow. Smiths point was that the free market was as much a check upon the greed and power of the merchant as it was on an interfering king or government bureaucrat.

But Smith saw another, more systematic corruption flowing from commercial society, one that was more pernicious and worried him deeply. Even as capitalism increases specialization, and more sophistication in the overall output of goods and services, the individuals caught up in the process become narrower in their interests and less concerned with what happens outside their shop, office, or showroom. They come to weigh everything in terms of their job, of profit and loss, and lose sight of the larger picture. This worry appeared years before in one of Smiths lectures, and is worth quoting in full:

Another bad effect of commerce is that it sinks the courage of mankind, and tends to extinguish martial spirit. In all commercial countries the division of labor is infinite, and every ones thoughts are employed about one particular thing.... The minds of men are contracted, and rendered incapable of elevation. Education is despised, or at least neglected, and heroic spirit is utterly extinguished.

Preventing this kind of mental mutilation, Smith says in the Wealth of Nations, deserves the most serious attention of government. It is in fact the one place where Smith actually commends a genuinely active role for civic institutions: creating a system of education that will counteract this deformity of the human character by the division of labor.

Through capitalism we gain, but we also lose. The loss, Smith felt, was felt most among the lowest classes  his particular example was employees in a pin factory  whose cramped place in the chain of production leaves no room for the enlargement of the mind and spirit, which the freedom of commercial society should open up. Smith in fact defined the problem of the assembly line mentality of factory workers almost two decades before the Industrial Revolution got fully under way  the problem that Karl Marx and his followers would call alienation. It was especially worrisome to Smith, because in free countries, where the safety of government depends very much upon the favourable judgement which the people may form of its conduct, a mass of ignorant, culturally degraded citizens easily becomes an immense drag on the system. They become easy prey to demagogues and applaud every attempt to undermine the foundations of that natural liberty which they have enjoyed in the first place. So, while Smith had given one set of issues its final, definitive shape  the link between commercial society, refinement, and liberty  he had opened up a whole new territory for discussion and debate, the cultural costs of capitalism. In fact, he and his Edinburgh friends had been arguing about this for almost a decade, even before Dr. Johnson had wondered during his Scottish tour whether any society benefitted from becoming entirely commercial in its mentality and attitudes. The Scots, including Adam Smith himself, had firmly answered No.

Arthur Herman

How the Scots Invented the Modern World (2001)
Chapter Eight A Select Society: Adam Smith and His Friends pp. 185f

The
Defense of Liberty

What constitutes the bulwark of our own liberty and independence?
It is not our frowning battlements, our bristling seacoasts, the guns of
our war steamers, or the strength of our gallant and disciplined army. These
are not our reliance against a resumption of tyranny in our fair land. All
of them may be turned against our liberties, without making us stronger
or weaker for the struggle. Our reliance is in the love of liberty
which God has planted in our bosoms. Our defense is in the preservation
of the spirit which prizes liberty as the heritage of all men, in all lands,
everywhere. Destroy this spirit, and you have planted the seeds of despotism
around your own doors. Familiarize yourselves with the chains of bondage,
and you are preparing your own limbs to wear them. Accustomed to trample
on the rights of those around you, you have lost the genius of your own
independence, and become the fit subjects of the first cunning tyrant who rises.